I was just in Denver the last few days where they were gearing up for the Colorado 420 celebration. But there’s not much to celebrate if you work for Intel: the company just announced job cuts of 12,000 as PC demand slumps. And research by Citibank projects banks will cut staff by about 30% by 2025 as customers switch more and more to digital channels and away from branches. Even if you disagree it certainly doesn’t seem like banks are moving away from technology…Speaking of Citi, Citigroup said it will no longer buy loans from the Prosper Marketplace platform and repackage them into securities, but did not indicate why. Regardless of the reason, it is probably not a good sign.

Jobs and housing drive our economy, and yesterday we learned that housing starts in the U.S. fell to 1089K in March from an upwardly revised 1194K in February (preliminary reading 1178K). Housing Starts and Building Permits were weak - no argument. All four regions saw declines with the South falling 4.9% and a 21.2% plunge in the Midwest. Building permits declined to 1086K in March from 1177K in February. The March reading for permits was a one-year low.

If these numbers indicate a trend it is not a good thing for builders, lenders, real estate agents, etc. Last autumn, for example, taking a look at Freddie Mac's numbers, the year-over-year index had improved 6.31%, and from its all-time low in October 2010 it had rebounded 38%. Back then FHLMC Deputy Chief Economist Len Kiefer noted, "The strong annual change of 6.31 percent is the best improvement we've seen in the MiMi on a year-over-year basis since July 2014." He also was fairly positive about the outlook in 2016 saying "we don't expect tighter monetary policy to generate a spike in longer-term interest rates in the foreseeable future", and "with stronger job and income growth, the net result may be strong growth in household formation, construction, and home sales." He did point out, however, that affordability is likely to decrease in 2016.

As home prices rise, affordability is declining. The median house price to median income ratio is around 4.6x, which is closing in on its bubble high of almost 5x, and well above its historical range of 3.2x - 3.6x. What is driving the increase in house prices? Restricted supply has been an issue, as housing starts have been anemic since the bust. Another issue until recently has been foreign demand, especially from China. Many Realtors on the West Coast have seen Chinese demand drop off the proverbial cliff as their desire to have dollar denominated assets has dropped. (If a Chinese investor funds a development which creates US jobs, they receive a green card.) Since Chinese buyers are cash-rich, they don't need a mortgage and are winning bidding wars by offering cash. 

Construction jobs have increased, adding several thousand jobs per month for many months. The numbers are well above the post-recession average of 5,000 per month. As recently as February marked the 12 monthin a row that the U.S. economy has added over 200,000 jobs, decreasing national unemployment to 5.5 percent. This is positive news for the housing industry, as people are more inclined to buy a home or upgrade their accommodations if employment opportunities are abundant.

Even back in December Zelman and Associates' Land Development Survey found that finished lot inflation remains temperate. The development index reached 61.9, down from 62.5 in November of 2014. The timeframe for raw land to be developed into finished lots is 15 months and the finished lot supply is down 3% YoY, whereas finished lot prices grew 12% YoY.  Survey respondents expect that community count will increase 10% within the next year and expected growth is highest in Las Vegas and Austin, whereas the lowest growth is expected in Baltimore, Phoenix and Miami. Finished lot price inflation of 9% is anticipated over the next year, a slight decline from 9.5% in November. For more information about Zelman and Associates please contact Ivy Zelman.

And going back even farther in time a similar survey from Zelman and Associates showed that price appreciation was still ahead of last year. As of September, the existing home price index was up 6.1 percent YoY, but year-end appreciation is expected to reach 5.4 percent, an increase from 4.9 percent in 2014. Home price appreciation is expected to hit 4.3 percent in 2016 and 3.7 percent in 2017. The average national entry-level monthly mortgage payment for homes bought in 2015 will equate to $1,010, which is down 5 percent YoY and equals to 33 percent of entry-level income versus the 1990-2009 average of 42 percent.

And going back an entire year, according to the May 2015 Realtors Confidence Index Survey, 63 percent of properties sold below list price. In fact, most properties (two-thirds) don't sell above list price and a year ago, about 70 percent of properties sold at a discount. The survey cited that 84 percent of properties that were sold between 2012 and May 2015 after 12 months were sold at a discount and less than half of the properties that sold within a month went for below list price whereas 24 percent sold for a premium. In May 2015, it was common for a property to sell between 4-11 percent off list price and a discount between 0-3 percent was the second most common outcome.

In California there are only about 2 ½ seasons on any given year. Every time I read "seasonal adjustments" I know they're not talking about some states, where buyers and sellers, realtors and brokers, all work under the assumption that it's always a great time to sell and move. At the start of 2015 (a year ago) the mortgage numbers for Q1 were better than expected, and pushing into the "moving season" there were a lot of optimistic folks out there. The guys and gals over at Compass Point noted this fact last year in their weekly Mortgage Market Monitor. "The purchase market continues to drive an expansion in the mortgage market as applications are significantly higher from the year ago period and over 40% higher than 1Q15. Refinance applications have obviously come down as rates have moved higher, but they still remain above the trough levels we saw in the second half of 2014. The momentum from 1Q into 2Q indicates the market should be larger than we expected initially and we are raising our FY15 origination estimates to $1.5 trillion from $1.3 trillion."

Turning to interest rates, volatility continues to ebb out of the market. Up a little, down a little, and Tuesday there were "minor losses" as oil prices and global equity indices pushed to multi-month highs. Both housing starts and building permits greatly missed estimates for March.

Today's economic calendar is again light with the MBA's application index for last week (+1.3% with refis +3% but purchases down 1%) and Existing Home Sales for March at 7AM PDT. For anyone guessing where mortgage prices are going to be, we closed Tuesday with the 10-year sitting at 1.78% and this morning we're at 1.77% and agency MBS prices, upon which borrower's rates are generally based, are slightly better.

Jobs and Announcements

But there are positive signs out there in lending, and companies are expanding. 1st Alliance Lending, LLC is seeking to hire DE Certified Underwriters with FHA and VA experience to work out of its East Hartford, CT office. "The company offers an excellent culture along with great benefits and a generous amount of PTO.  Qualified candidates should send their cover letters and resumes to Terri Waldie at 860-282-0293, ext. 2218.

Private Mortgage Insurance company Genworth Financial is seeking a new Account Manager in Columbus to cover its Ohio territory as a result of an internal promotion. Candidates should have exceptional customer interaction, sales execution, and leadership skills. The person hired will be expected to provide the highest level of internal and external customer service, manage customer relationships, and develop growth strategies for assigned accounts. The successful candidate will be responsible for developing calling plans to cover all assigned accounts, monitor branch volume and calling activity, and take necessary actions to achieve account volume goals. They will execute and lead implementation of Genworth products and initiatives, and identify and communicate new opportunities to provide solutions to customer needs. The ideal candidate will have 4+ years of experience in a sales role, have a college degree or equivalent industry/sales experience, strong presentation and communication skills, and have the ability to work flexible hours with occasional overnight travel. Interested candidates should send their resume to Amy Haynes.

And for brokers' products, Carrington Wholesale Lending is now including conventional loans among its portfolio of products, "adding to our Government lending experience - providing more choices for our broker customers, their agent partners and their clients. Together with our government product line and expertise, Carrington is the go-to lender for both government and conventional lending, ensuring we're able to provide loan choices across the entire market to a more diverse range of customers. Carrington's Wholesale group's new conventional products include Conforming Fixed Rate Loans (Purchase/Refinance available), High Balance (Higher Loan Amounts, Purchase/Refinance), Freddie Open Access (Refinance), DU Refi Plus (Refinance), Lender Paid Mortgage Insurance (LPMI), and Texas Home Equity."

In reviewing Fannie MORA and Freddie CORE reviews it's clear that seller/servicers continue to struggle with establishing and implementing an internal audit program.  The first part of the challenge is that the guidelines are vague in determining what the GSEs want. What Mortgage Quality Management and Research, LLC (MQMR) has extrapolated in its dealings with the GSEs and clients is that there are three key items needed: 1. Initial risk assessment of the seller/servicer's organization as a whole, 2. An internal audit charter (policy and procedure and acceptance by the Board of Directors), and 3. Minimum 12-month calendar for performing ongoing audits of various departments, functions, and processes.  The second part of the challenge is then implementing those three items, but it is very hard for a lender to staff internally without having to hire a cadre of individuals with broad and deep subject matter expertise in areas such as compliance, originations, operations, quality control, vendor management, servicing, IT, HR, and many more.  MQMR's internal audit division has been assisting seller/servicers in meeting their internal audit requirements whether fully outsourced, or supplementing the existing program that is in place. For more information on internal audit programs contact Casey Hughes (818-940-1200x104). MQMR will be attending the upcoming MBA Legal Issues and Regulatory Conference in Denver and the TMBA in San Antonio if you'd like to meet in person.

The industry can hardly wait for folks in their 20's and 30's to start buying houses. But on the hiring side of new entrants in lending, XINNIX is offering its popular webinar, "Millennials in the Mortgage Business."XINNIX, The Mortgage Academy, notes that with the aging sales force in the mortgage industry, it has become essential to fuel the industry with new talent. Learn how to source, train and retain Millennials to build a successful and productive sales force in this OnDemand webinar. Click here to view Millennials in the Mortgage Business now!

Yesterday this commentary had some recent trends in lock periods and pricing, and one entry noted NewLeaf Wholesale's policy. ("NewLeaf Wholesale Broker's may elect to 'float down' from the original locked rate one time only. The 'float down' option may be exercised no earlier than thirty (30) days prior to the earlier of the loan's scheduled closing date or the original expiration date...") One item was omitted regarding the new float down option: it is available for NewLeaf's 180-day lock program only. (This allows borrowers to shop for a property and protect their interest rate risk while they shop.) I apologize for any confusion.